Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on October 01, 2018 Published on September 30, 2018

SBI (265)

SBI was range-bound between ₹261 and ₹274 and closed 1.8 per cent lower for the week. The bias remains negative and any intermediate bounce in the coming days could be short-lived. A strong break below ₹261 — the 200-week moving average — can take the stock lower to ₹255. If SBI manages to bounce from ₹255, a relief rally to ₹270 is possible. But a strong break below ₹255 will increase the downside pressure. Such a break will increase the possibility of the stock tumbling to ₹245 thereafter. On the other hand, if SBI sustains above ₹261, a bounce to ₹275 is possible. The region between ₹275 and ₹277 is a key resistance zone. A strong break above ₹277 is needed to ease the downside pressure. This break will increase the likelihood of the stock rallying to ₹285 over the short term. Traders with a high-risk appetite can go short on rallies at ₹273 and ₹276. Stop-loss can be placed at ₹291 for a target of ₹245. Revise the stop-loss lower to ₹267 as soon as the stock moves down to ₹259.

ITC (₹296.7)

ITC shares fell 2.3 per cent and were down for the fourth consecutive week. Clusters of moving average and trendline supports are poised in the ₹290-₹280 region, which is holding well for now. ITC made a low of ₹289.5 last week and bounced from there. If the stock sustains above ₹290, an up-move to ₹305 and ₹307 is possible. A strong break above ₹307 will take the stock up to ₹317 or even ₹321 over the short term. It will confirm the end of the corrective fall that has been in place since early September. But if ITC reverses lower from the ₹305-307 resistance region, it can fall back to ₹295 and ₹290 levels again. In such a scenario, a range-bound move between ₹290 and ₹307 is possible for some time. A break below ₹290 can take ITC lower to ₹285 and ₹280. Investors can hold their long positions and retain the stop-loss at ₹265. Medium-term traders who took long positions last week on dips at ₹298 and ₹293 can hold them. Retain the stop-loss at ₹270 for a target of ₹355.

Infosys (₹727.8)

Infosys surged 3 per cent last week, recovering most of the loss made in the week earlier. The sharp bounce in the past week has triggered the stop-loss on the short positions recommended last week. The price action over the past two weeks leaves the immediate outlook unclear for the stock. Key support is at ₹690 and resistance is in between ₹740 and ₹750. Infosys can remain in a broad sideways range between ₹690 and ₹750. A breakout on either side of ₹690 or ₹750 will then decide the next move. A strong break above ₹750 can take the stock higher to ₹757 initially. A break above ₹757 will then take the stock fhigher to ₹770 thereafter. On the other hand, if the Infosys stock breaks below ₹690, it can come under selling pressure. This break will drag the stock lower to ₹660 on the back of profit-booking. It will also confirm that the uptrend since August 2017 has reversed. Further break below ₹660 will then increase the likelihood of the stock extending its down-move to ₹630 and ₹625

RIL (₹1,258.2)

Contrary to expectations, RIL surged over 3 per cent last week. The short positions recommended last week have been stopped out on the strong bounce-back move witnessed last week. The head and shoulder reversal pattern mentioned last week has got negated. A key support is at ₹1,242. As long as the stock remains above this support, an up-move to ₹1,280 is possible. A strong break and a decisive close above ₹1,280 will boost the momentum. Such a break will then pave way for a fresh rally to ₹1,350 or even higher levels. The bullish outlook will get negated if RIL declines below ₹1,242 decisively. Such a break can drag the stock lower to ₹1,200 or ₹1,195 in the near term. Further break below ₹1,195 will then increase the likelihood of the downmove extending to ₹1,185 or ₹1,180. The level of ₹1,180 is a crucial long-term trend-line support for the stock. The uptrend that has been in place since the beginning of this year will come under threat if RIL declines below ₹1,180.

Tata Steel (₹580.35)

Tata Steel tumbled over 7 per cent last week. The stock is poised above a crucial support level of ₹575. Whether Tata Steel bounces from this support or not will determine the next move. A bounce from ₹575 will ease the downside pressure. In such a scenario, an up-move to ₹605 or ₹615 can be seen in the near term. An inability to breach ₹615 levels can drag the stock to ₹590. In such a scenario, a range-bound move between ₹575 and ₹615 can be seen. But if Tata Steel manages to breach ₹615, it can extend its rally to ₹637 and ₹640 thereafter. On the other hand, if Tata Steel breaks below ₹575, it can fall to ₹559. Further break below ₹559 will then increase the likelihood of the stock extending its fall to ₹540 or ₹535 thereafter. Medium-term traders can retain their long positions. Keep the stop-loss at ₹560. Revise the stop-loss higher to ₹605 as soon as the stock moves up to ₹613. Move the stop-loss higher to ₹615 as soon as Tata Steel goes up to ₹630.

 

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